Ichigo Preserves and Improves Real Estate[Provisional Translation Only]
This English translation of the original Japanese document is provided solely for information purposes.
Should there be any discrepancies between this translation and the Japanese original, the latter shall prevail.

July 22, 2016
REIT Issuer
Ichigo Hotel REIT Investment Corporation (3463)
1-1-1 Uchisaiwaicho, Chiyoda-ku, Tokyo
Representative: Osamu Miyashita, Executive Director
www.ichigo-hotel.co.jp/english
Asset Management Company
Ichigo Real Estate Investment Advisors Co., Ltd.
Representative: Wataru Orii, President & Representative Statutory Executive Officer
Inquiries: Hiroto Tajitsu, Statutory Executive Officer, Head of Administration
Tel: +81-3-3502-4892

Acquisition of Ten Hotel Assets
Ichigo Real Estate Investment Advisors Co., Ltd. (“IRE”), the asset management company of Ichigo
Hotel REIT, decided today to acquire ten hotel assets (total acquisition price: 27,258,000,000 yen)at Ichigo Hotel REIT.
I. Acquisition Summary
Total appraisal value: 28,213,000,000 yen, total acquisition price: 27,258,000,000 yen
010
Nest Hotel
Osaka
Shinsaibashi

Asset No.
Asset Name

011
Comfort Hotel
CentralInternational
Airport012
Smile HotelTokyo Asagaya

014
Smile Hotel
Asakusa

February 1975*

September 1992

Stay-Only1

Hotel Type
Date Built

August 1984

Form ofOwnership

November 2004

January 1993

Trust beneficiary interest in real estate (juekiken)

Appraisal Value2
Acquisition Price013
Nest Hotel Naha

3

7,660,000,000 yen

5,770,000,000 yen

3,940,000,000 yen

3,770,000,000 yen

2,020,000,000 yen

7,600,000,000 yen

5,308,000,000 yen

3,910,000,000 yen

3,750,000,000 yen

1,920,000,000 yen

SellerNishi Nihon
Holdings GK

Contract Date

July 22, 2016

July 22, 2016

July 22, 2016

July 22, 2016

July 22, 2016

Closing Date

August 17, 2016

August 17, 2016

August 17, 2016

August 17, 2016

August 17, 2016

Shinsaibashi Jisho GK

Financing Method

New share issuance, borrowing, and cash-on-handSettlement Method

Lump-sum payment* Completed full seismic reinforcement to current standards in June 2015.

1

4,5

015
Nest Hotel
Matsuyama

Asset No.
Asset Name

016
Hotel Livemax
NihombashiHakozaki

017
Comfort Hotel
Okayama019
Comfort Hotel
SuzukaAugust 2009

July 2007

Stay-Only1

Hotel Type
Date Built

November 1988

Form ofOwnership

February 2015

November 1983

Trust beneficiary interest in real estate (juekiken)

Appraisal Value2
Acquisition Price

018
Comfort Hotel
Kushiro3

1,640,000,000 yen

1,410,000,000 yen

1,220,000,000 yen

413,000,000 yen

370,000,000 yen

1,610,000,000 yen

1,360,000,000 yen

1,200,000,000 yen

300,000,000 yen

300,000,000 yen

Seller

Shinsaibashi Jisho GK

Contract Date

July 22, 2016

July 22, 2016

July 22, 2016

July 22, 2016

July 22, 2016

Closing Date

August 17, 2016

August 17, 2016

August 17, 2016

August 17, 2016

August 17, 2016

Financing Method

New share issuance, borrowing, and cash-on-handSettlement Method

Lump-sum payment

1

4,5

Stay-only hotels are located near train stations, airports, business centers, major thoroughfares,
shopping centers, and other areas of high customer traffic, these hotels service travelers
primarily as places to stay at very attractive rates, without extraneous banquet facilities, etc.
2
Appraisal value is as of May 1, 2016.
3
Acquisition price excludes incidental expenses such as property, city planning, andconsumption taxes.
4
For further details, please refer to today’s release “Issuance of New Shares and Secondary
Share Offering.”
5
Financing details will be announced when determined.

2

II. Acquisition Rationale
By taking full advantage of its sponsor Ichigo’s deep value-add capabilities and executing uponIchigo Hotel REIT’s growth-driving action plans, Ichigo Hotel REIT is committed tomaximizing shareholder value for Ichigo hotel REIT shareholders.
With today’s ten hotel acquisitions, Ichigo Hotel REIT is more than doubling its portfolio size
from JPY 20.4 billion to JPY 47.6 billion.2 The acquisitions will be financed by the
public-offering net proceeds, bank borrowing, and cash-on-hand. The growth in Ichigo Hotel
REIT’s market capitalization and shares outstanding via this public offering is expected tosignificantly improve Ichigo Hotel REIT’s share liquidity.
Of the ten hotels, five have variable rent leases with the hotel operators (in which Ichigo Hotel
REIT shareholders share in the upside/downside of higher/lower hotel rates) and five are fixed
rent leases. The forecast average NOI yield of the acquired assets is 5.5% and the averagepost-depreciation NOI yield is 4.3%.3
Ichigo Hotel REIT believes that today’s acquisitions will contribute both to Ichigo Hotel REIT’s
earnings stability via geographic and asset diversification and its ongoing earnings growth. The
acquisitions of these ten stay-only hotels will also support the generation of core earnings
stability for Ichigo Hotel REIT shareholders via fixed rent leases, while providing earnings
upside via variable rent leases at hotels benefiting from overseas tourist demand and rising hotel
rates in Tokyo, Osaka, Hokkaido, and Okinawa.
Ichigo Hotel REIT will continue to work to maximize shareholder value via the execution of its
external and organic growth strategies and by leveraging Ichigo Group’s strengths.

1

Portfolio size is on an acquisition price basis. It does not include consumption tax or otherexpenses related to acquisitions (brokerage fees, taxes, and public charges).
2
Average NOI = Total NOI (net operating income) of the ten assets divided by the totalacquisition price of the ten assets, where NOI is the NOI derived from the Direct Capitalization
Method (DCM) in the real estate appraisal report at acquisition.
3
Average post-depreciation NOI Yield is calculated as NOI plus depreciation divided by the
total acquisition price of the ten assets, where NOI is the NOI derived from the Direct
Capitalization Method (DCM) in the real estate appraisal report at acquisition. Depreciation isan estimated value calculated by Ichigo Real Estate Investment Advisors using the straight-line
method.

3

III. Hotel Lease Status(1) Hotels
No.

Hotel Name

010

Nest Hotel Osaka Shinsaibashi
Comfort Hotel Central
International Airport

Nest Hotel Japan

012

Smile Hotel Tokyo Asagaya

K.K. Hospitality Operations

013

Nest Hotel Naha

Nest Hotel Japan

014

Smile Hotel Asakusa

K.K. Hospitality Operations

015

Nest Hotel Matsuyama
Hotel Livemax
Nihombashi-Hakozaki

Nest Hotel Japan

017

Comfort Hotel Okayama

Greens Co., Ltd.

018

Comfort Hotel Kushiro

Greens Co., Ltd.

019

Comfort Hotel Suzuka

Greens Co., Ltd.

011

016

LesseeGreens Co., Ltd.

Live Max Inc.

(2) Date of lease contract change or succession: August 17, 2016 (Expected)(3) For details about lease terms, please refer to “Rent Overview” in IV “Asset Details.”(4) Lessees meet Ichigo Hotel REIT’s selection criteria set forth in the “Report on theManagement Structure and System of the Issuer of Real Estate Investment Trust Units andRelated Parties.” (Note: If Ichigo Hotel REIT is the lessee under a master lease contract,then the tenant refers to the sub-lessee.)IV. Asset Details
Details of the acquired assets follow.
Notes to the Asset Details:
1) The names of the architect, builder, structural engineer, and inspection agency are those ofwhen the building was built.
2) Forecast NOI is the difference between the operating revenues and the operating expenses of
the asset for the initial year. NOI yield is calculated by dividing NOI by Acquisition Price.
Amounts less than a million are rounded off.
3) The average post-depreciation NOI Yield is calculated as NOI (net operating income) minus
depreciation divided by the total acquisition price of the ten assets. Depreciation is an
estimated value calculated by IRE using the straight-line method.
4) Structure of a building refers to the structure mentioned in the real estate register. The
following abbreviations are used with regards to structure: RC stands for reinforced concrete;
SRC for steel reinforced concrete; F for number of stories; and B for basement.

4

(1) Nest Hotel Osaka Shinsaibashi(i) Location and Features
Rebranded as a Nest Hotel in 2014, this stay-only hotel is a 1-minute walk from
Nagahoribashi Station on Osaka Municipal Subway’s Sakaisuji Line and Nagahori
Tsurumi-ryokuchi Line as well as a 6-minute walk from Shinsaibashi Station on
Midosuji Line.
The hotel is situated in the Shinsaibashi district, one of Osaka’s major commercial
and shopping areas full of large commercial complexes and restaurants. It isconveniently located to meet business and leisure (domestic and inbound) demand,with easy access to tourist spots, such as Universal Studios Japan and Kyocera Dome
Osaka.
(ii) Property Photos and Map

5

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

January 30, 2004 - August 31, 2026 (Expected)

Location

2-4-10 Minamisenba, Chuo-ku, Osaka City, OsakaLand

Building

Property Right

FreeholdSize

1,072.78 m2

ZoningCoverage Ratio/Floor
Area Ratio
Property Right

Commercial

ZoningHotel

Structure

SRC 13F

Total Floor Area

7,968.49m2

Construction Date

August 28, 1984

80%/800%
Freehold

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

7,660,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

7,740,000,000 yen

Number of Guest Rooms

302

Architect

The Zenitaka Corporation First-Class Registered Architects Office

Builder

The Zenitaka Corporation Osaka Office

Structural Engineer

The Zenitaka Corporation First-Class Registered Architects OfficeInspection Agency

Osaka City

PML (Assessor)

5.70% (Sompo Risk Management & Health Care Inc.)

Collateral

None (Expected)
Rent Overview (as of July 22, 2016)

Number of Tenants

Deposit1
Minimum Guaranteed Rent: 128,555,633 yen p.a.1
Variable Rent: GOP of the month – (Minimum Guaranteed Rent + a certain
percentage of revenues of the month + a certain percentage of the GOP of themonth)
Lease deposit: 32,200,000 yen, No guarantee deposit

Leasable Space

8,057.26 m2

Leased Space

8,057.26 m2

Occupancy

100%

Property Management Company

Building Management & Strategy Inc.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type

Pass-throughAssumed NOI (NOI yield)

5.3%

Depreciation Ratio

4.6%

Monthly Rental Income

Special Items
The hotel is equipped with a machine-operated, multi-level parking lot in accordance with a government ordinanceconcerning required parking facilities for buildings. However, the parking facility is currently out of operation formaintenance.
1
Minimum Guaranteed Rent is the annual minimum guaranteed rent covering the 12 months from August 2016 toJuly 2017.

6

Appraisal Overview
Name

Nest Hotel Osaka Shinsaibashi

Appraisal Value

7,660,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
ExpensesNote

7,660,000,000 yen

Valuation determined via both a direct capitalization
valuation and DCF valuation

7,740,000,000 yen
438,096,000 yen
438,096,000 yen
0 yen
32,697,867 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

2,825,667 yen

Based on the average of the past 12 years of engineering
reports

PM Fee2,400,000 yen

200,000 yen per month

Leasing Brokerage
Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

0 yen
24,770,200 yen
511,520 yen
2,190,480 yen

Based on insurance estimates
0.5% of Income calculated as variable expense

405,398,133 yen
644,000 yen
50,144,391 yen

Net Profit

355,897,742 yen

Cap Rate

4.6%

Value via DCF Method

Based on FY2016 actual amounts (including depreciable
property tax)

Based on 2.0% investment yield
Based on average renewal expense of the past 12 years inengineering reports and FF&E reserves
Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

7,620,000,000 yen

Discount Rate

4.4%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

4.8%

Based upon risk-adjusted NOI

Value via Cost Approach

2,290,000,000 yen

Land

77.5%

Building

22.5%

Sum of building and FF&E prices divided by sum ofbuilding, FF&E, and land prices
Notes

None

7

(2) Comfort Hotel Central International Airport(i) Location and Features
This stay-only hotel is a 5-minute walk from Central Japan International Airport anda 3-minute walk from the Central Japan International Airport Station of Nagoya
Railroad. The hotel is connected to the airport and the station via a walkway.
The airport has seen a rise in arrivals and departures by low-cost carriers in recent
years. Located close to such a growing international airport, the hotel can serve avariety of customers – business travelers, tourists, and airport and airline staffers.
The hotel is expected to meet rising inbound tourism demand as it is situated at thebase of the so-called “dragon tourism route” spanning the Chubu and Hokuriku
regions.
The hotel has relatively spacious guest rooms – single-bed rooms of 20 square meters,
double-bed rooms of 25 square meters, and twin-bed rooms of 25 square meters – sothat it can meet the demands of both tourists and business travelers. All the roomscommand a nice view of the ocean or the airport.

(ii) Property Photos and Map

8

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

December 27, 2012 - August 31, 2026 (Expected)

Location

4-2-3 Centrair, Tokoname City, Aichi

Land

Building

Property Right

FreeholdSize(1) 3,314.30 m2 (2) 3,322.81 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/500%

Property Right

Freehold

ZoningHotel

Structure

RC 8F

Total Floor Area

(1) 5,250.18 m2 (2) 6,349.45 m2

Construction Date

(1) November 2, 2004 (2) June 29, 2006

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

5,770,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

5,850,000,000 yen

Number of Guest Rooms

346

Architect

Takenaka Corporation First-Class Registered Architects Office

BuilderTakenaka Corporation Nagoya Office

Structural Engineer

Takenaka Corporation First-Class Registered Architects OfficeInspection Agency

Japan ERI Co., Ltd.

PML (Assessor)

13.57% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Fixed Rent: 25,240,333 yen / monthly, Variable Rent: None

Deposit

Lease deposit: 151,441,998 yen, No guarantee deposit

Leasable Space

11,599.63 m2

Leased Space

11,599.63 m2

Occupancy

100%

Property Management Company

Uniho Co., Ltd.

Master Lease Company

None

Master Lease Type—

Assumed NOI (NOI yield)

5.0%

Depreciation Ratio

4.0%

9

Special Items
1.

2.

Smoke ventilation windows have been installed in some places but have yet to be put in place in others, according to
the hotel building’s application drawing. Therefore, the hotel’s overall smoke ventilation area may be insufficient.
The seller has agreed to rectify the issue at the seller’s expense.
Smoke vents are installed within a two-meter radius from the hotel’s exterior emergency stairs. The seller has agreed
to rectify the issue at the seller’s expense.

10

Appraisal Overview
Name

Comfort Hotel Central International Airport

Appraisal Value

5,770,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

5,770,000,000 yen
5,850,000,000 yen
302,883,996 yen
302,883,996 yen
0 yen
36,911,569 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

8,657,333 yen

Based on the average of the past 12 years of engineering
reports

PM Fee1,140,000 yen

Based on outsourcing contract

Leasing Brokerage
Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

0 yen

594,600 yen

Based on insurance estimates
0.4% of Income calculated as variable expense, roadoccupancy fees, etc.

1,260,336 yen
265,972,427 yen
3,028,840 yen

Based on 2.0% investment yield

29,342,000 yen

Based on average renewal expense of the past 12 years inengineering reports

Net Profit

239,659,267 yen

Cap Rate

4.1%

Value via DCF Method

Based on FY2016 actual amounts (including depreciable
property tax)

25,259,300 yen

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

5,730,000,000 yen

Discount Rate

3.9%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

4.3%

Based upon risk-adjusted NOI

Value via Cost Approach

5,790,000,000 yen

Land

70.5%

Building

29.5%
Notes

None

11

(3) Smile Hotel Tokyo Asagaya(i) Location and Features
Rebranded as a Smile Hotel in 2010, this stay-only hotel is located a 1 minute-walkfrom Asagaya Station on the JR Chuo and Sobu Lines.
With only a 10-minute train ride to Shinjuku Station, one of the major terminal
stations in Tokyo, the hotel has easy transportation access to central Tokyo. There are
a number of old-style Japanese restaurants in the neighborhood, and the hotel canmeet business and leisure demand.
(ii) Property Photos and Map

12

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

June 30, 2010 - August 31, 2026 (Expected)

Location

3-37-11 Asagaya-minami, Suginami-ku, Tokyo

Land

Building

Property Right

FreeholdSize

919.72 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/500%

Property Right

Freehold

ZoningHotel, Retail

Structure

RC B1F/5F

Total Floor Area

2,732.47 m2

Construction Date

January 29, 1993

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

3,940,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

4,000,000,000 yen

Number of Guest Rooms

112

Architect

Shin Kensetsu First-Class Registered Architects Office

Builder

Shin Kensetsu

Structural Engineer

Shin Kensetsu First-Class Registered Architects OfficeInspection Agency

Suginami Ward

PML (Assessor)

6.31% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)
8

Number of Tenants
Monthly Rental Income

1

Minimum Guaranteed Rent: 58,413,994 yen p.a.2
Variable Rent = GOP of the month - (Minimum Guaranteed Rent + a certain
percentage of revenues of the month + a certain percentage of the GOP of themonth)

DepositNo lease deposit, No guarantee deposit

Leasable Space

2,721.70 m2

Leased Space

2,721.70 m2

Occupancy

100%

Property Management Company

Building Management & Strategy Inc.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type

Pass-throughAssumed NOI (NOI Yield)

5.0%

Depreciation Rate

4.0%

13

Special Items
Part of a building’s concrete foundation in the north-side adjacent land cross over into the hotel’s premises. There isno memorandum of understanding with the other building owner that covers this issue.
2. A construction inspection report indicates that certain emergency lighting should be repaired. The seller has agreed torectify the issue at the seller’s expense.
1
Monthly Rental Income and Deposit indicated are of the hotel facility. A separate retail contract exists.
2
Minimum Guaranteed Rent is the annual minimum guaranteed rent covering the 12 months from August 2016 toJuly 2017.
1.

14

Appraisal Overview
Name

Smile Hotel Tokyo Asagaya

Appraisal Value

3,940,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016

Appraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
IncomeVacancy Loss
Expenses
Administrative andMaintenanceExpenses

AmountNote

3,940,000,000 yen

Valuation determined via both a direct capitalization valuation
and DCF valuation

4,000,000,000 yen
232,136,658 yen
233,592,720 yen
1,456,062 yen
35,561,999 yen
0 yen

Offset by common fee and pass-throughUtility Expenses

24,186,000 yen

Based on past actual amounts

Repair Expenses

1,152,667 yen

Based on the average of the past 12 years of engineering reports

PM Fees

1,800,000 yen

150,000 yen per month

Leasing Brokerage
Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

188,419 yen
6,892,500 yen
181,730 yen
1,160,683 yen

Based on FY2016 actual amounts
Based on insurance estimates
0.5% of Income calculated as variable expense

196,574,659 yen
492,999 yen
17,147,911 yen

Net Profit

179,919,747 yen

Cap Rate

4.5%

Value via DCF Method

Based on the expected turnover rate and tenant acquisition costs
for similar assets

Based on 2.0% investment yield.
Based on average renewal expense of the past 12 years inengineering reports and FF&E reserves
Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual characteristics,
market trends, etc.

3,920,000,000 yen

Discount Rate

4.3%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics taken
into account

Terminal Cap Rate

4.7%

Based upon risk-adjusted NOI

Value via Cost Approach

1,080,000,000 yen

Land

70.8%

Property

29.2%

Sum of building and FF&E prices divided by sum of building,
FF&E, and land prices
Notes

None

15

(4) Nest Hotel Naha(i) Location and Features
Rebranded as a Nest Hotel in 2013, this stay-only hotel has good transportation
access, and is 7 minutes from Naha Airport by car and a 5-minute walk from
Asahibashi Station on the Okinawa Urban Monorail.
The hotel is also within a walking distance from the Kokusai-dori (International
Street), the biggest shopping district full of shops and restaurants in Okinawa
prefecture. The hotel can capture business and leisure (domestic and inbound)demand.
(ii) Property Photos and Map

16

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

December 16, 2004 - August 31, 2026 (Expected)

Location

1-6-1 Nishi, Naha City, Okinawa

Land

Building

Property Right

FreeholdSize2,322.62 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/400%

Property Right

Freehold

ZoningHotel

Structure

SRC 11F

Total Floor Area

9,240.20 m2

Construction Date

February 28, 1975

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

3,770,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

3,800,000,000 yen

Number of Guest Rooms

193

Architect

Nissei Sekkei

Builder

Obayashi Corporation Tokyo Head Office

Structural Engineer

Nissei Sekkei

Inspection Agency

Naha City

PML (Assessor)

4.63% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Minimum Guaranteed Rent: 100,640,513 yen p.a.1
Variable Rent = GOP of the month - (Minimum Guaranteed Rent + a certain
percentage of revenues of the month + a certain percentage of the GOP of themonth)

Deposit

Lease deposit: 25,200,000 yen, No guarantee deposit

Leasable Space

9,240.20 m2

Leased Space

9,240.20 m2

Occupancy

100%

Property Management Company

Nippon Kanzai Co., Ltd.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type

Pass-throughAssumed NOI (NOI Yield)

6.2%

Depreciation Rate

4.7%

17

Special Items
The hotel was designed and built in accordance with the former quake-resistance standards before the amendments in
1981, but full seismic reinforcement to meet current standards was completed in June 2015. The Naha City Mayor has
approved the building’s quake-resistance renovation plan in accordance with paragraph 3, Article 17 of the Act for
Promotion of Renovation for Earthquake-Resistant Structures of Buildings, and has confirmed the completion of theconstruction.
1
Minimum Guaranteed Rent is the annual minimum guaranteed rent covering the 12 months from August 2016 toJuly 2017.

18

Appraisal Overview
Name

Nest Hotel Naha

Appraisal Value

3,770,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

3,770,000,000 yen
3,800,000,000 yen
250,464,000 yen
250,464,000 yen
0 yen
19,685,862 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

6,442,000 yen

Based on the average of the past 12 years of engineering
reports

PM Fee2,160,000 yen

180,000 yen per month

Leasing Brokerage
Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

0 yen

495,940 yen

Based on insurance estimates

1,252,320 yen

0.5% of Income calculated as variable expense

230,778,138 yen
504,000 yen

Based on 2.0% investment yield
Based on average renewal expense of the past 12 years inengineering reports and FF&E reserves

25,949,641 yen

Net Profit

205,332,497 yen

Cap Rate

5.4%

Value via DCF Method

Based on FY2016 actual amounts (including depreciable
property tax)

9,335,602 yen

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

3,750,000,000 yen

Discount Rate

5.2%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

5.6%

Based upon risk-adjusted NOI

Value via Cost Approach

1,250,000,000 yen

Land

75.3%

Building

24.7%

Sum of building and FF&E prices divided by sum ofbuilding, FF&E, and land prices
Notes

None

19

(5) Smile Hotel Asakusa(i) Location and Features
Rebranded as a Smile Hotel in 2010, this stay-only hotel is within walking distancefrom Tokyo’s major tourist destination Asakusa. It is also a 10-minute walk from
Asakusa Station on the Tokyo Metro’s Ginza Line, and is conveniently located tomeet business and leisure demand.
The hotel’s east-side rooms command an up-close view of the Tokyo Skytree,
offering guests a great view of the tower.
(ii) Property Photos and Map

20

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

June 30, 2010 - August 31, 2026 (Expected)

Location

6-35-8 Asakusa, Taito-ku, Tokyo
Property RightLand

Building

Freehold1

Size

361.38 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/500%

Property Right

Freehold

ZoningHotel, Retail

Structure

SRC 10F

Total Floor Area

1,793.43 m2

Construction Date

September 22, 1992

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

2,020,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

2,040,000,0000 yen

Number of Guest Rooms

96

Architect

Atelier Core

Builder

Shin Kensetsu

Structural Engineer

Atelier Core

Inspection Agency

Taito Ward

PML (Assessor)

3.92% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Minimum Guaranteed Rent: 31,316,680 yen p.a.1
Variable Rent = GOP of the month - (Minimum Guaranteed Rent + a certain
percentage of revenues of the month + a certain percentage of the GOP of themonth)

DepositNo lease deposit, No guarantee deposit

Leasable Space

1,793.43 m2

Leased Space

1,793.43 m2

Occupancy

100%

Property Management Company

Building Management & Strategy Inc.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type

Pass-throughAssumed NOI (NOI Yield)

5.0%

Depreciation Rate

3.7%

21

Special Items
The fire-fighting equipment and facility (special fire-fighting equipment and facility) inspection indicated that the
automatic fire alarm system’s detection suffers from malfunctions. The seller has agreed to rectify the issue at the seller’s
expense.
1
Minimum Guaranteed Rent is the annual minimum guaranteed rent covering the 12 months from August 2016 toJuly 2017.

22

Appraisal Overview
Name

Smile Hotel Asakusa

Appraisal Value

2,020,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

2,020,000,000 yen
2,040,000,000 yen
105,144,000 yen
105,144,000 yen
0 yen
8,235,077 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenant

Utility Expenses

0 yen

Borne by tenant

Repair Expenses

1,137,417 yen

Based on the average of the past 12 years of engineering
reports

PM Fee1,200,000 yen

100,000 yen per month

Leasing Brokerage
Fees
Taxes
Insurance Premiums
Other Expenses
Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

0 yen
4,729,700 yen
116,520 yen

Based on insurance estimates

1,051,440 yen

1.0% of Income calculated as variable expense

96,908,923 yen
0 yen

None, based on current contract
Based on average renewal expense of the past 12 years inengineering reports and FF&E reserves

11,061,735 yen

Net Profit

85,847,188 yen

Cap Rate

4.2%

Value via DCF Method

Based on FY2016 actual amounts

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

2,010,000,000 yen

Discount Rate

4.0%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

4.4%

Based upon risk-adjusted NOI

Value via Cost Approach

544,000,000 yen

Land

63.9%

Building

36.1%

Sum of building and FF&E prices divided by sum ofbuilding, FF&E, and land prices
Notes

None

23

(6) Nest Hotel Matsuyama(i) Location and Features
Rebranded as a Nest Hotel in 2015, this stay-only hotel is a 3-minute walk from
Katsuyamacho Station on Iyo Railway’s Intra-city Street Car Jonan Line and 25
minutes from Matsuyama Airport by car.
The hotel is situated in Matsuyama City’s largest commercial and shopping area of
Okaido/Nibancho, and can thus capture business and leisure demand. In addition, thehotel is within a walking distance from Matsuyama Castle and an adjacent park. Togo
Onsen (hot spring) is a 10-minute ride from Katsuyamacho Station by street car.

(ii) Property Photos and Map

24

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

March 29, 2005 - August 31, 2026 (Expected)

Location

1-7-1 Niban-cho, Matsuyama City, Ehime

Land

Building

Property Right

FreeholdSize

1,692.01 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/500%

Property Right

Freehold

ZoningHotel

Structure

RC 11F

Total Floor Area

6,671.94 m2

Construction Date

November 16, 1988

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

1,640,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

1,640,000,000 yen

Number of Guest Rooms

190

Architect

Daiken Architects Associates

Builder

Shimizu Corporation Shikoku Office

Structural Engineer

Daiken Architects Associates

Inspection Agency

Matsuyama City

PML (Assessor)

5.68% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Minimum Guaranteed Rent: 69,494,400 yen p.a.1
Variable Rent = GOP of the month - (Minimum Guaranteed Rent + a certain
percentage of revenues of the month + a certain percentage of the GOP of themonth)

Deposit

Lease deposit: 18,000,000 yen, No guarantee deposit

Leasable Space

6,671.94 m2

Leased Space

6,671.94 m2

Occupancy

100%

Property Management Company

Nippon Kanzai Co., Ltd.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type
Assumed NOI (NOI Yield)
Depreciation Rate

3

Pass-through
2

7.4%
5.5%

25

Special Items
1.

Buttress-free concrete block walls, measuring over 1.2-meters high, are in place on the east, southwest, and southeast
sides of the hotel premises. The engineering report indicates that the walls present no immediate problem.
2. The seller has agreed to rectify at the seller’s expense the following issues described in the engineering report.
A. An air-conditioning refrigerant pipe penetrates through a ventilation louver installed in an area that could catch
fire in case of a fire nearby. Thus, the louver fails to meet fire-protection requirements..
B. Eaves of over one-meter width are in place, even though those eaves don’t appear to be a temporary feature.
C. A banquet room is divided into four sections by operable partitions, and the smoke ventilation is insufficientwhen the east-side banquet rooms are combined or all the four sections are put together.
D. The fuel injection pump of the emergency power supply is defective.
1
Minimum Guaranteed Rent is the annual minimum guaranteed rent covering the 12 months from August 2016 toJuly 2017.

26

Appraisal Overview
Name

Nest Hotel Matsuyama

Appraisal Value

1,640,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

1,640,000,000 yen
1,640,000,000 yen
138,000,000 yen
138,000,000 yen
0 yen
18,124,257 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

3,761,417 yen

Based on the average of the past 12 years of engineering
reports

PM Fee2,160,000 yen

180,000 yen per month

Leasing Brokerage
Fees
Taxes

0 yen
10,801,400 yen

Based on FY2016 actual amounts

Insurance Premiums

417,840 yen

Based on insurance estimates

Other Expenses

983,600 yen

0.7 % of Income calculated as variable expense

Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

119,875,743 yen
360,000 yen

Based on average renewal expense of the past 12 years inengineering reports and FF&E reserves

25,390,131 yen

Net Profit

93,845,612 yen

Cap Rate

5.8%

Value via DCF Method

Based on 2.0% investment yield

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

1,640,000,000 yen

Discount Rate

5.6%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

6.0%

Based upon risk-adjusted NOI

Value via Cost Approach

1,180,000,000 yen

Land

46.4%

Building

53.6%

Sum of building and FF&E prices divided by sum ofbuilding, FF&E, and land prices
Notes

None

27

(7) Hotel Livemax Nihombashi-Hakozaki(i) Location and Features
Built in February 2015, this new stay-only hotel is a 3-minute walk from
Suitengumae Station on Tokyo Metro’s Hanzomon Line.
The hotel is well-located near central Tokyo with good access to the Tokyo Station
area and the Nihombashi and Ginza districts. Moreover, it is within a 5-minutewalking distance from the Tokyo City Air Terminal that is directly linked toSuitengumae Station. The hotel offers easy transportation access to both Haneda
Airport and Narita Airport via limousine services.
Access to Tokyo’s main tourist destinations, such as Tokyo Skytree, is convenient
and the hotel is well-suited to meet both business and leisure demand.

(ii) Property Photos and Map

28

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

TrusteeMizuho Trust Bank, Limited

Period of Trust Contract

September 30, 2015 - August 31, 2026 (Expected)

Location29-5 Nihombashi-Hakozakicho, Chuo-ku, Tokyo

Land

Building

Property Right

FreeholdSize

123.54 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/700%

Property Right

Freehold

ZoningHotel, Retail

Structure

Steel 11F

Total Floor Area

853.00 m2

Construction Date

February 17, 2015

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

1,410,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

1,430,000,000 yen

Number of Guest Rooms

48

Architect

Jyukyo Kensetsu, Tokyo Office First-Class Registered Architects Office

Builder

Jyukyo Kensetsu

Structural Engineer

Jyukyo Kensetsu, Tokyo Office First-Class Registered Architects OfficeInspection Agency

Good-Eyes

PML (Assessor)

3.20% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

The tenant has not consented to disclosure.1

Deposit

The tenant has not consented to disclosure.

Leasable Space853.00 m2

Leased Space853.00 m2

Occupancy

100%

Property Management Company

Uniho Co., Ltd.

Master Lease Company

Ichigo Hotel REIT Investment Corporation

Master Lease Type

Pass-throughAssumed NOI (NOI Yield)

4.9%

Depreciation Rate

3.5%
Special Items

None
1

Fixed rent

29

Appraisal Overview
Name

Hotel Livemax Nihombashi-Hakozaki

Appraisal Value

1,410,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

1,410,000,000 yen
1,430,000,000 yen
72,000,000 yen
72,000,000 yen
0 yen
5,783,945 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

609,417 yen

PM FeeLeasing Brokerage
Fees
Taxes

Based on the average of the past 12 years of engineering
reports

1,080,000 yen

90,000 yen per month

0 yen
3,812,608 yen

Based on FY2016 actual amounts

Insurance Premiums

65,920 yen

Based on insurance estimates

Other Expenses

216,000 yen

0.3% of Income calculated as variable expense

Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

66,216,055 yen
360,000 yen

Based on 2.0% investment yield

861,750 yen

Based on average renewal expense of the past 12 years inengineering reports

Net Profit

65,714,305 yen

Cap Rate

4.6%

Value via DCF Method

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

1,400,000,000 yen

Discount Rate

4.4%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

4.8%

Based upon risk-adjusted NOI

Value via Cost Approach

599,000,000 yen

Land

51.2%

Building

48.8%
Notes

None

30

(8) Comfort Hotel Okayama(i) Location and Features
This stay-only hotel is a 15-minute walk from Okayama Station, a major railway hub
in the Chugoku and Shikoku regions where JR West’s Sanyo Shinkansen high-speed
train, Sanyo Main Line, Uno Line and other local trains converge. The station serves
as a center of business and leisure activities in these regions.
The hotel is in the heart of Okayama City’s downtown and within walking distanceof the city’s major tourist spots, Okayama Castle and one of Japan’s three greatest
gardens, Okayama Korakuen.
In addition, Kurashiki – a historic scenic town and a major sightseeing destination in
Okayama Prefecture – is accessible by train in16 minutes from JR Okayama Station
to JR Kurashiki Station.
(ii) Property Photos and Map

31

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

December 21, 2010 - August 31, 2026 (Expected)

Location

1-1-13 Marunouchi, Kita-ku, Okayama City, Okayama

Land

Building

Property Right

FreeholdSize

986.26 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/400%, 600%

Property Right

Freehold

ZoningHotel

Structure

SRC 10F

Total Floor Area

5,543.70 m2

Construction Date

November 30, 1983

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

1,220,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

1,210,000,000 yen

Number of Guest Rooms

208

Architect

Shimizu Corporation

Builder

Shimizu Corporation Hiroshima Office

Structural Engineer

Shimizu Corporation

Inspection Agency

Okayama City

PML (Assessor)

5.12% (Sompo Risk Management & Health Care Inc.)

Collateral

None (Expected)
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Fixed Rent: 7,650,000 yen / monthly, Variable Rent: None

Deposit

Lease deposit: 30,600,000 yen, No guarantee deposit

Leasable Space

5,543.70 m2

Leased Space

5,543.70 m2

Occupancy

100%

Property Management Company

Nippon Kanzai Co., Ltd.

Master Lease Company

None

Master Lease Type—

Assumed NOI (NOI Yield)2

6.6%

Depreciation Rate

3

4.7%

32

Special Items
The property does not have sufficient parking spaces to meet the requirements of Okayama City’s ordinance on parking
facilities for public buildings. To meet this requirement, the hotel has contracted with the owners of nearby parking lots to
use their parking facilities.

33

Appraisal Overview
Name

Comfort Hotel Okayama

Appraisal Value

1,220,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

1,220,000,000 yen
1,210,000,000 yen
91,800,000 yen
91,800,000 yen
0 yen
12,512,417 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

1,911,167 yen

Based on the average of the past 12 years of engineering
reports

PM Fee1,800,000 yen

150,000 yen per month

Leasing Brokerage
Fees
Taxes

0 yen
8,191,400 yen

Based on FY2016 actual amounts

Insurance Premiums

299,450 yen

Based on insurance estimates

Other Expenses

310,400 yen

0.3% of Income calculated as variable expense and based on
actual amounts for road occupancy fees

Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

79,287,583 yen
612,000 yen

Based on average renewal expense of the past 12 years inengineering reports

14,627,333 yen

Net Profit

65,272,250 yen

Cap Rate

5.4%

Value via DCF Method

Based on 2.0% investment yield

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

1,220,000,000 yen

Discount Rate

5.2%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

5.6%

Based upon risk-adjusted NOI

Value via Cost Approach

569,000,000 yen

Land

47.9%

Building

52.1%
Notes

None

34

(9) Comfort Hotel Kushiro(i) Location and Features
This stay-only hotel is a 2-minute walk from Kushiro Station on the JR Nemuro
Main Line. It is located in a commercial district in front of the station and close to alimousine bus stop for Tancho Kushiro Airport. The hotel offers easy access to the
airport, and can meet demand among business travelers and tourists visiting eastern
Hokkaido.
Kushiro City was designated as a tourism-oriented model city in January 2016, andthe municipal government has been promoting tourism with a campaign focused on
the city’s wealth of nature, which is expected to increase visits from overseas tourists.

(ii) Property Photos and Map

35

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

December 27, 2012 - August 31, 2026 (Expected)

Location

13-1-1 Kita-odori, Kushiro City, Hokkaido

Land

Building

Property Right

FreeholdSize

895.05 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/600%

Property Right

Freehold

ZoningHotel

Structure

RC 9F

Total Floor Area

3,180.58 m2

Construction Date

August 7, 2009

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

413,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

412,000,000 yen

Number of Guest Rooms

126

Architect

Taisei Corporation First-Class Registered Architects Office

BuilderTaisei Corporation Sapporo Office

Structural Engineer

Taisei Corporation First-Class Registered Architects OfficeInspection Agency

Kushiro City

PML (Assessor)

8.82% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Fixed Rent: 3,069,917 yen / monthly, Variable Rent: none

Deposit

Lease deposit: 18,419,502 yen, No guarantee deposit

Leasable Space

3,180.58 m2

Leased Space

3,180.58 m2

Occupancy

100%

Property Management Company

Nippon Kanzai Co., Ltd.

Master Lease Company

None

Master Lease Type—

Assumed NOI (NOI Yield)

7.7%

Depreciation Rate

4.8%
Special Items

None

36

Appraisal Overview
Name

Comfort Hotel Kushiro

Appraisal Value

413,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

413,000,00 yen
412,000,000 yen
36,839,004 yen
36,839,004 yen
0 yen
13,671,795 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

3,329,000 yen

Based on the average of the past 12 years of engineering
reports

PM Fee1,800,000 yen

150,000 per month

Leasing Brokerage
Fees
Taxes

0 yen
8,182,100 yen

Based on FY2016 actual amounts

Insurance Premiums

176,500 yen

Based on insurance estimates

Other Expenses

184,195 yen

0.5% of Income calculated as variable expense

Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

23,167,209 yen
368,390 yen

Based on 2.0% investment yield

445,917 yen

Based on average renewal expense of the past 12 years inengineering reports

Net Profit

23,089,682 yen

Cap Rate

5.6%

Value via DCF Method

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

414,000,000 yen

Discount Rate

5.4%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

5.8%

Based upon risk-adjusted NOI

Value via Cost Approach

850,000,000 yen

Land

17.7%

Building

82.3%
Notes

None

37

(10) Comfort Hotel Suzuka(i) Location and Features
This stay-only hotel is a 3-minute walk from Shiroko Station on the Kintetsu Nagoya
Line of Kintetsu Railway. The hotel is 15 minutes by car from Suzuka Circuit,
Japan’s premiere motor racing course and a major event venue with an amusementpark and sports facilities. Suzuka Circuit can accommodate as many as 160,000
spectators and hosts a number of big motor sports events throughout the year.
In addition, there are a lot of factories of major companies in the area. With easy
access to these factory sites by car, the hotel is well-positioned to capture businessdemand.
(ii) Property Photos and Map

38

Asset Overview
Legal Form of Asset

Trust beneficiary interest in real estate (juekiken)

Trustee

Mitsubishi UFJ Trust and Banking Corporation

Period of Trust Contract

December 27, 2012 - August 31, 2026 (Expected)

Location

14-26, Shiroko-Ekimae, Suzuka City, Mie

Land

Building

Property Right

FreeholdSize

553.26 m2

ZoningCommercial

Coverage Ratio/Floor
Area Ratio

80%/400%

Property Right

Freehold

ZoningHotel

Structure

Steel 6F

Total Floor Area

2,186.65 m2

Construction Date

July 17, 2007

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Value

370,000,000 yen

Appraisal Date

May 1, 2016

Value by Direct Capitalization Method

371,000,000 yen

Number of Guest Rooms

105

Architect

Takenaka Corporation Nagoya Office First-Class Registered Architects Office

BuilderTakenaka Corporation Nagoya Office

Structural Engineer

Takenaka Corporation Nagoya Office First-Class Registered Architects OfficeInspection Agency

Bureau Veritas Japan

PML (Assessor)

7.39% (Sompo Risk Management & Health Care Inc.)

Collateral

None
Rent Overview (as of July 22, 2016)

Number of Tenants

1Monthly Rental Income

Fixed Rent: 2,573,833 yen/ monthly, Variable Rent: none

Deposit

Lease deposit: 15,442,998 yen, No guarantee deposit

Leasable Space

2,186.65 m2

Leased Space

2,186.65 m2

Occupancy

100%

Property Management Company

Uniho Co., Ltd.

Master Lease Company

None—

Master Lease Type
Assumed NOI (NOI Yield)
Depreciation Rate3

2

7.7%
5.1%
Special Items

None

39

Appraisal Overview
Name

Comfort Hotel Suzuka

Appraisal Value

370,000,000 yen

Appraiser

Daiwa Real Estate Appraisal Co., Ltd.

Appraisal Date

May 1, 2016
AmountAppraisal Value
Value by Direct Capitalization
MethodIncomeMaximum Obtainable
Rental Income
Vacancy Loss
Expenses

Note
Valuation determined via both a direct capitalization
valuation and DCF valuation

370,000,000 yen
371,000,000 yen
30,885,996 yen
30,885,996 yen
0 yen
7,874,857 yen

Administrative andMaintenance Expenses

0 yen

Borne by tenants

Utility Expenses

0 yen

Borne by tenants

Repair Expenses

2,794,167 yen

Based on the average of the past 12 years of engineering
reports

PM Fee1,080,000 yen

Based on outsourcing contract

Leasing Brokerage
Fees
Taxes

0 yen
3,648,100 yen

Based on FY2016 actual amounts

Insurance Premiums

102,590 yen

Based on insurance estimates

Other Expenses

250,000 yen

0.8% of Income calculated as variable expense

Net Operating Income(NOI)
Income on Investmentof Deposits Received
Capital Expenditure

23,011,139 yen
308,860 yen

Based on average renewal expense of the past 12 years inengineering reports

4,413,083 yen

Net Profit

18,906,916 yen

Cap Rate

5.1%

Value via DCF Method

Based on 2.0% investment yield

Based on transactions of similar assets and comprehensive
assessment of the asset’s location, its individual
characteristics, property right, etc.

370,000,000 yen

Discount Rate

4.9%

Based on transactions of similar assets and the yields offinancial assets with the asset’s individual characteristics
taken into account

Terminal Cap Rate

5.3%

Based upon risk-adjusted NOI

Value via Cost Approach

452,000,000 yen

Land

22.3%

Building

77.7%

Sum of building and FF&E prices divided by sum ofbuilding, FF&E, and land prices
Notes

None

40

V. Seller Profile
Name
Address
Representative

Principal Businesses
CapitalEstablishment Date
Equity Holder

Relationship with Ichigo Hotel
REIT or Asset Manager1

Name
Address
Representative

Principal Businesses

CapitalEstablishment Date
Equity Holder

Relationship with Ichigo Hotel
REIT or Asset Manager1

1

Nishi Nihon Holdings GK
1-1-1 Uchisaiwaicho, Chiyoda-ku, TokyoManaging Member: Ippan Shadan Hojin VSLManager: Hiroshi Sasaki
1. The acquisition, holding, and sale of trust
beneficiary interest (juekiken)
2. The holding, management, and sale of real estate
3. Other businesses relating to the above
100,000 yen
October 23, 2015
Ippan Shadan Hojin VSL
While the Seller is not a related party as defined in the
Act on Investment Trusts and Investment Corporations(the “Act”), the acquisition process has followed theinternal rules of IRE vis-à-vis related party transactions
for the following reasons. First, Ichigo Inc., the 100%
owner of IRE, is a related party according to the Act,and Ichigo Inc. owns more than half of the equity of
Nishi Nihon Holdings GK. Second, Ichigo Estate Co.,
Ltd., a related party as defined in the Act, has provided
asset management advisory services to IRE.
Shinsaibashi Jisho Holdings GK
1-1-1 Uchisaiwaicho, Chiyoda-ku, TokyoManaging Member: Ippan Shadan Hojin IES2Manager: Takehisa Tei
1. The acquisition, holding, and sale of trust
beneficiary interest (juekiken)
2. The holding, management, and sale of real estate
3. Acquisition, holding, and disposition of shares,
equity, and specific investment regarding the above
4. Other businesses relating to the above
100,000 yen
March 26, 2010
Ippan Shadan Hojin IES2
While the Seller is not a related party as defined in the
Act on Investment Trusts and Investment Corporations(the “Act”), the acquisition process has followed theinternal rules of IRE vis-à-vis related party transactions
for the following reasons. First, Ichigo Inc., the 100%
owner of IRE, is a related party according to the Act,and Ichigo Inc. owns more than half of the equity of
Shinsaibashi Jisho Holdings GK. Second, Ichigo EstateCo., Ltd., a related party as defined in the Act, hasprovided asset management advisory services to IRE.

Ichigo Hotel REIT also followed strict related-party procedures to manage conflicts ofinterest, and obtained second opinions to assess the fairness of the transaction prices.

41

VI. Ownership History
Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date
1

Previous Owner
Unrelated Party―

Investment―

4,935,603,687 yen
December 2015――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price
Acquisition Date
1

Nest Hotel Osaka Shinsaibashi
Current Owner
Nishi Nihon Holdings GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Comfort Hotel Central International Airport
Current Owner
Previous Owner
Shinsaibashi Jisho GK
Unrelated Party
Related Party as defined in theinternal rules of IRE. Please―see “Seller Profile” in Section
V.
Investment―

5,245,000,000 yen
February 2016――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

42

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date
1

Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price
Acquisition Date―

Investment―

2,850,000,000 yen
December 2015――

Nest Hotel Naha
Current Owner
Shinsaibashi Holdings GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Previous Owner
Unrelated Party―

Investment―

2,180,279,647 yen
December 2015――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date
1

Previous Owner
Unrelated Party

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

Asset Name
Overview
Name

1

Smile Hotel Tokyo Asagaya
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Smile Hotel Asakusa
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Previous Owner
Unrelated Party―

Investment―

1,330,000,000 yen
December 2015――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

43

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date
1

Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date―

Investment―

1,170,653,492 yen
December 2015――

Hotel Livemax Nihombashi-Hakozaki
Current Owner
Previous Owner
Shinsaibashi Jisho GK
Unrelated Party
Related Party as defined in theinternal rules of IRE. Please―see “Seller Profile” in Section
V.
Investment―

1,230,000,000 yen
September 2015――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price
Acquisition Date
1

Previous Owner
Unrelated Party

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

Asset Name
Overview
Name

1

Nest Hotel Matsuyama
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Comfort Hotel Okayama
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Previous Owner
Unrelated Party―

Investment―

990,000,000 yen
December 2015――

The acquisition price exceeds the current owner’s (sponsor Ichigo) acquisition price,
but is below the hotel’s most recent appraisal value. Given Ichigo’s value-add actions
after acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT
is confident that the transaction price is fair.

44

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price
Acquisition Date
1

Comfort Hotel Kushiro
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Previous Owner
Unrelated Party―

Investment―

350,000,000 yen
February 2016――

The acquisition price is both below the current owner’s (sponsor Ichigo) acquisition
price and the hotel’s most recent appraisal value. Given Ichigo’s value-add actions after
acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT is
confident that the transaction price is fair.

Asset Name
Overview
Name
Relationship to
Ichigo Hotel REIT
Acquisition
Rationale
Acquisition Price1
Acquisition Date
1

Comfort Hotel Suzuka
Current Owner
Shinsaibashi Jisho GK
Related Party as defined in theinternal rules of IRE. Pleasesee “Seller Profile” in Section
V.

Previous Owner
Unrelated Party―

Investment―

320,000,000 yen
February 2016――

The acquisition price is both below the current owner’s (sponsor Ichigo) acquisition
price and the hotel’s most recent appraisal value. Given Ichigo’s value-add actions after
acquiring the hotel to increase NOI and lower operating costs, Ichigo Hotel REIT is
confident that the transaction price is fair.

VII.

Broker Profile

N/A

VIII.

Acquisition Schedule

Contract Date

July 22, 2016

Acquisition and Settlement Date

August 17, 2016 (Expected)

IX. Earnings Outlook
For the acquisition’s earnings impact, please refer to today’s release “Earnings and Dividend
Forecast Revision for the January 2017 Fiscal Period and Earnings and Dividend Forecast for
the July 2017 Fiscal Period .”45

Portfolio Reference Information
I.

Post-Acquisition Portfolio Assets
No.

Area1

Property% ofPortfolio3

001

E-1

Smile Hotel Kyoto Shijo

Kinki

4,480

9.4%

002

E-2

Hotel Vista Premio

Kinki

3,600

7.6%

003

D-2

Hotel Wing International Nagoya

Hokuriku/Tokai

2,670

5.6%

004

A-1

Nest Hotel Sapporo Ekimae

Hokkaido/ Tohoku

2,160

4.5%

005

E-3

Chisun Inn Osaka Hommachi

Kinki

1,630

3.4%

006

D-1

Comfort Hotel Hamamatsu

Hokuriku/Tokai

1,550

3.3%

007

E-4

Hotel Suave Kobe Asuta

Kinki

1,490

3.1%

008

A-2

Nest Hotel Sapporo Odori

Hokkaido/ Tohoku

1,450

3.0%

009

G-1

Valie Hotel Tenjin

Kyushu/Okinawa

1,380

2.9%

010

E-5

Nest Hotel Osaka Shinsaibashi

Kinki

7,600

15.9%

011

D-3

Comfort Hotel Central Airport Hotel

Hokuriku/Tokai

5,308

11.1%

012

C-1

Smile Hotel Tokyo Asagaya

Tokyo

3,910

8.2%

013

G-4

Nest Hotel Naha

Kyushu/Okinawa

3,750

7.9%

014

C-2

Smile Hotel Asakusa

Tokyo

1,920

4.0%

015

F-2

Nest Hotel Matsuyama

Chugoku/Shikoku

1,610

3.4%

016

C-3

Hotel Livemax Nihombashi Hakozaki

Tokyo

1,360

2.9%

017

F-1

Comfort Hotel Okayama

Chugoku/Shikoku

1,200

2.5%

018

A-3

Comfort Hotel Kushiro

Hokkaido/ Tohoku

300

0.6%

019

D-4

Comfort Hotel Suzuka

Hokuriku/Tokai

300

0.6%

47,668100.0%

Total 19 Properties
1

Acquisition
Price2(mm yen)

The regional code identifies the area in which the asset is located.
Code
A
B
C
D
E
F
G

RegionHokkaido/Tohoku
Kanto
Tokyo
Hokuriku/Tokai
Kinki
Chugoku/Shikoku
Kyushu/Okinawa

Prefectures
Hokkaido, Aomori, Iwate, Miyagi, Akita, Yamagata, Fukushima
Ibaraki, Gunma, Saitama, Chiba, Kanagawa, Yamanashi, Nagano, Niigata
Tokyo
Toyama, Ishikawa, Fukui, Gifu, Shizuoka, Aichi, Mie
Osaka, Hyogo, Kyoto, Shiga, Nara, Wakayama
Tottori, Shimane, Okayama, Hiroshima, Yamaguchi, Kagawa, Tokushima, Kochi, Ehime
Fukuoka, Saga, Nagasaki, Kumamoto, Miyazaki, Kagoshima, Okinawa

2

Acquisition Price is the price as indicated in the purchase and sales agreement for the asset(excluding fees and incidental expenses such as property, city planning, and consumption
taxes).
3% of Portfolio is the Acquisition Price as a percentage of the Total Acquisition Price androunded to the nearest second decimal place.

46

II.

Rapid Portfolio Growth via Ichigo’s Sponsor Support
8/17/2016 Acquisition

10 Assets JPY 27.2 B

10 Assets
JPY 27.2B
19 Assets
JPY 47.6B

At IPO

9 Assets JPY20.4B

9 Assets
JPY 20.4B

III.

Post-Acquisition

Acquisition(August 17, 2016)

At IPO

Acquisition Summary
10 Hotels, Total Acquisition Price JPY 27B, Average NOI Yield: 5.5%
Location

AcquisitionPrice(million yen)Appraisal Value(million yen)

No. of Guest
Rooms

No.

Name

Hotel Type

010

Nest Hotel Osaka Shinsaibashi

Stay-only

Osaka

7,600

7,660

5.3%

Fixed+Variable

302

011

Comfort Hotel Central International
AirportStay-only

Aichi

5,308

5,770

5.0%

Fixed

346

012

Smile Hotel Tokyo Asagaya

Stay-only

Tokyo

3,910

3,940

5.0%

Fixed+Variable

112

013

Nest Hotel Naha

Stay-only

Okinawa

3,750

3,770

6.2%

Fixed+Variable

193

014

Smile Hotel Asakusa

Stay-only

Tokyo

1,920

2,020

5.0%

Fixed+Variable

96

015

Nest Hotel Matsuyama

Stay-only

Ehime

1,610

1,640

7.4%

Fixed+Variable

190

016

Hotel Livemax
Nihombashi-Hakozaki

Stay-only

Tokyo

1,360

1,410

4.9%

Fixed

48

017

Comfort Hotel Okayama

Stay-only

Okayama

1,200

1,220

6.6%

Fixed

208

018

Comfort Hotel Kushiro

Stay-only

Hokkaido

300

413

7.7%

Fixed

126

019

Comfort Hotel Suzuka

Stay-only

Mie

Fixed

Total

47

NOI Yield

300

370

7.7%

27,25828,213

Average 5.5%

Rent Terms

105
1,726 Rooms